Weighted Alpha

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DEFINITION of 'Weighted Alpha'

A weighted measure of how much a stock has risen or fallen over a certain period, usually a year. Generally, more emphasis is placed on recent activity by assigning higher weights to it than those assigned to earlier movements. This helps to give a return figure that has a greater focus on the most current period and is a more relevant measure for short-term analysis. This technique is popular with technical analysts.

BREAKING DOWN 'Weighted Alpha'

If the stock was up over the period, it will have a positively weighted alpha. An unchanged stock price has a small weighted alpha. A stock whose price has fallen over the period will have a negatively weighted alpha. Technical analysts use this measure to identify companies that have shown a strong trend over the past year and, more specifically, to focus their attention on companies whose momentum is building.

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RELATED FAQS
  1. What is the Weighted Alpha formula and how is it calculated?

    Investors and analysts use weighted alpha to measure stock price movements over the course of (typically) one year. The values ... Read Full Answer >>
  2. What are the best technical indicators to complement Weighted Alpha?

    Weighted alpha isn't necessarily meant to complement other technical indicators; instead, it helps technical investors and ... Read Full Answer >>
  3. How do I use Weighted Alpha to create a forex trading strategy?

    In foreign exchange or conventional security markets, weighted alpha is designed to help discriminate between different instruments ... Read Full Answer >>
  4. What is a common strategy traders implement when using the Weighted Alpha?

    A trader can use weighted alpha to measure a stock's price action over a certain time frame, usually measuring growth over ... Read Full Answer >>
  5. Why is the Weighted Alpha important for traders and analysts?

    The weighted alpha is a technical indicator used by traders and analysts to identify securities that have performed well ... Read Full Answer >>
  6. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>

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